Meanwhile, the NARs chief economist Lawrence Yun indicated that while current activity has improved overall, conditions are still challenging for potential home buyers.

"Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved, ... However, supply shortages still exist in parts of the country, wages are flat, and tight credit conditions are deterring a higher number of potential buyers from fully taking advantage of lower interest rates."

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Monday, July 21, 2014

The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated that the national economic activity weakened in June with the index falling to a very weak level of 0.12 from a level of 0.16 in May while the three month moving average worsened to a weak level of 0.13.

The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”.

The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth.

A value at or below -0.70 for the three month moving average of the national activity index (CFNAI-MA3) indicates that the national economy has either just entered or continues in recession.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales declined slightly, falling 0.31% from May but rising 1.73% above the level seen in June 2013 while, adjusting for inflation, “real” discretionary retail sales declined 0.48% on the month and falling 0.26% since June 2013.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) increased 2 basis points to 4.19% since last week while the purchase application volume increased 4% and the refinance application volume increased 0.4% over the same period.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

Monday, July 07, 2014

The latest Employment Situation Report indicated that in June, net non-farm payrolls increased by 288,000 jobs overall with the private non-farm payrolls sub-component adding 262,000 jobs while the civilian unemployment rate declined to 6.1% over the same period.

Net private sector jobs increased 0.22% since last month climbing 2.13% above the level seen a year ago and climbing 1.04% above the peak level of employment seen in December 2007 prior to the Great Recession.

Thursday's employment situation report showed that conditions for the long term unemployed improved in June while still remaining distressed by historic standards.

Workers unemployed 27 weeks or more declined to 3.081 million or 32.8% of all unemployed workers while the median term of unemployment declined to 13.1 weeks and the average stay on unemployment went declined to 33.5 weeks.

Thursday's Employment Situation report showed that in June “total unemployment” including all marginally attached workers declined to 12.1% while the traditionally reported unemployment rate also improved declining to 6.1%.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit definition of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

On a month-to-month basis, total residential spending declined 1.5% from April climbing 7.0% above the level seen in May 2013 and remaining well below the peak level seen in 2006.

Single family construction spending declined 1.40% from April rising 10.9% since May 2013 remaining well below it's peak level reached in 2006.

Non-residential construction spending increased 1.1% from April but rose 10.7% above the level seen in May 2012 and remaining a well below the peak level reached in October 2008.

The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.